China's stock market is crashing again

An
investor reacts as she stands in front of an electronic board
showing stock information at a brokerage house in Fuyang, Anhui
province, China, August 7, 2015.REUTERS

The slumber in China’s stock market came to an abrupt end this
afternoon with markets plunging into the close.

The benchmark Shanghai Composite index finished down 6.12% at
3,749.1 points, its largest percentage decline since July 27.

Providing an indication of the price action seen in recent
months, the fall was only the sixth-largest percentage decline so
far in 2015.

Over the past 12 months the index is still up by 67%.

All sectors finished deep in the red with telecommunications, IT,
industrials, materials, consumer cyclicals and utilities all
falling by more than 7%. Energy and financials were spared the
worst of the declines, sliding by 2.38% and 3.81% respectively.

Business Insider Australia

The losses in Shanghai were mirrored across the nation,
particularly in small-cap stocks which underperformed their
larger peers.

The CSI 300 and 500 indices, those which contain the 300 and
500-largest firms by market cap in Shanghai and Shenzhen, fell
6.19% and 7.47% respectively.

Elsewhere the Shenzhen Composite and tech-heavy ChiNext indices
finished with losses of more than 6%.

The SSE 50, made up of the 50-largest firms my market
capitalization in Shanghai, was the relative outperformer, only
declining 5.57%.

In late trade the Chinese renminbi, the center of attention last
week after the PBOC unexpectedly allowed market forces to play a
greater role in determining its trading level, is modestly
weaker.

The USD/CNY currently buys 6.4017, above the PBOC’s Tuesday
fixing level of 6.3966.

A
bank clerk counts Chinese currency notes as her colleague attends
a customer at a bank outlet in Huaibei in central China's Anhui
province.AP

According to a report from Bloomberg, concerns that China’s government
may pare back it efforts to support the market may have been
behind the sharp plunge seen this afternoon.

Investors are also cutting expectations of further stimulus after
data showed a stronger housing market and the central bank
injected cash into the financial system, which reduces odds of an
imminent cut to lenders’ reserve requirements,” said Bloomberg.

While it occurred well after the market began to plunge, ratings
agency Moody’s released a note late on Tuesday in
which they stated “the depreciation in the renminbi that has
followed the shift in the mechanism for determining the daily
fixing rate of the Chinese currency against the dollar is credit
negative for Chinese property developers, given their significant
exposure to foreign-currency debt, the majority of which is
denominated in USD”.

“At end-2014, an average 35.5% of the debt structures of the 43
rated developers analyzed in the new Moody’s report comprised
foreign currency-denominated debt – including offshore bonds and
bank loans – and this foreign-currency risk is largely unhedged,
the group noted.

Earlier in the session Chinese
new home prices fell by 3.7% in the 12-months to July, an
improvement on the 4.9% decline reported in June.